Retirement -- Financial Planning for the Survivor.

[2B]

It's rather pathetic that in this day and age the wives' "plan" is simply to abdicate all responsibility for their financial futures to their respective husbands, and subsequently to their friends' husbands.

From a certain perspective they get what they deserve. I am going to great lengths to "educate" DW. She is more than happy to let me do it all but then frets about not knowing what's going on when I point out to her that no one on my side of the family made it past 85 (and few over 70). On her side, over 75% made it over 85. They may rot in a nursing home but they live far longer.

Part of my plan is to actually train my children. Set up a simple asset allocation method and count of DW or my children to manage it until it becomes an inheritance. If I make it to 70, I also plan to turn it over to them to manage because of all the damage I've seen the elderly do to themselves (both sides) when they get on in years.

 

[Rustic23]

If I die first, DW looses 40% of Military pension, 30% of SS. That is one of the reasons we plan to delay SS to 70.

 

[harley]

Since we're living off investments, DW or I would be fine if anything happened to the other one. Since I'm still carrying some life insurance, she'd probably be a little better off if I die. But since I cut the grass, cook some, and do other chores, she thinks I'm worth a little more than the money.

However, my mother's husband just died, and due to some incredibly dumb assumptions and even worse planning, she's going to be living on somewhere between 15-30% of what they had coming in before. They assumed she'd die first, despite the fact that he was older, and in contrast to any actuarial table ever published. "We don't need no steenkin' survivor benefits!" And with minimal life insurance, it's going to be hard to develop a decent cash flow.

I will, of course, help as needed. But by planning for this sort of thing yourself ahead of time, you not only are providing for your spouse, you are avoiding putting your kids in a very uncomfortable position.

 

[haha]

I will, of course, help as needed. But by planning for this sort of thing yourself ahead of time, you not only are providing for your spouse, you are avoiding putting your kids in a very uncomfortable position.

I agree, but I think that unless the budget is very tight, no reason that the survivor should't take a small to moderate hit when the mate dies. Why should a person deny himself/herself during retirement so that a survivor can have a cushier trip?

This doesn't apply to what happened to your mother- this is a large hit, and as you mention puts the children in a tight spot.

Ha

 

[Milton]

my mother's husband just died, and due to some incredibly dumb assumptions and even worse planning, she's going to be living on somewhere between 15-30% of what they had coming in before. They assumed she'd die first, despite the fact that he was older, and in contrast to any actuarial table ever published.... I will, of course, help as needed.... we're living off investments

Wow.

You do what you need to do: at the end of the day, she is your mom. But I do hope that you won't allow your own financial security (and your wife's) to become jeopardized by this situation not of your making.

 

[harley]

Wow.

You do what you need to do: at the end of the day, she is your mom. But I do hope that you won't allow your own financial security (and your wife's) to become jeopardized by this situation not of your making.

We won't need to, although if it did put us in a bad spot it would be hard to decide what to do or how to handle it. Mostly, I'm trying to get her to see that she can't assume she'll only live a couple more years and can keep all her money in cash. She's only 73. I think she believes she controls the universe or something.

You raise a good point, though. If we don't make sure our spouses are taken care of (and vice-versa), we could be creating a situation that would not only make them unhappy, it could destroy inter-generational relationships as the kids have to make choices between their immediate family and mom or dad. Not what I would want to leave for my daughter.

 

[Milton]

It sounds like you (luckily) have more than adequate resouces and will be able to help her without making any real adjustments to your own planning or lifestyle.

That's certainly a good thing. While adult children usually feel a need to help aged parents even when the latter have been foolish, their spouses are - perhaps understandably - not always sympathetic. And who needs marital disharmony, especially in retirement?

I'm trying to get her to see that she can't assume she'll only live a couple more years and can keep all her money in cash. She's only 73.

I have similar discussions with my own mother (aged 69).

 

[rickier55]

I do most of the financial planning. When we retired 3 years ago, I elected the highest "survivor" option available (which gives spouse about 55% cola'd). She will have her own small pension (eligible now, but we're waiting to max it out when she turns 60). She will also get SS a few years later. We have a small retirement portfolio from which we're drawing about 2.5 - 3.0% to supplement my pension.

I was planning to drop life insurance significantly after retiring, but, after going through the numbers a few times, I decided to maintain my life insurance at least until 65. At that point the cost will go up significantly, but we will also have a better handle on both her pension, and her SS.

I've also put together a fairly short list of "things to do when I die". It's not a real "financial plan", but it is a summary of where we are, and what she should consider doing to make sure she's ok. ie, how much she can expect for survivors benefits, how much she can reasonable draw on retirement portfolio, what she should consider doing with insurance proceeds, and what she might want to consider with the house.

I'm shooting for having her have 90-100% of our current spending level(cola'd), though I really suspect she should be ok at even 80%.

Rick

 

[Finance Dave]

Can the survivor maintain the basic lifestyle on $24k?
How are you dealing with this aspect of planning?

It obviously depends, but I think most people would be ok. The biggest factor I think is whether your largest fixed cost is paid for...your house. although for some people property taxes are quite high. As you said, food, utilities (semi variable), medical costs, food, etc. are all variable....and as I look at our budget, those will be the biggest expenses after retirement (our mortgage will be paid off).

How do I deal with it? We basically are planning to oversave by about $200k. We figured out what we think we'll need, then tacked on about $200k...this will ensure that if one spouse dies, we'll still have plenty. Also, for us, SS is a relatively small portion of our retirement income because we have saved quite a bit for retirement, and plan to have over $2M on the day we hang it up.

Edit: Also consider life insurance if you have any. If one spouse dies while in the workforce, they MIGHT get life insurance through their employer (our employer offers 1x annual salary). Granted if it's after you stop working, this doesn't apply unless you buy insurance...which we won't do.

Dave

 

[friar1610]

I've also put together a fairly short list of "things to do when I die". It's not a real "financial plan", but it is a summary of where we are, and what she should consider doing to make sure she's ok. ie, how much she can expect for survivors benefits, how much she can reasonable draw on retirement portfolio, what she should consider doing with insurance proceeds, and what she might want to consider with the house.
Rick

I've been trying to do the same thing - a tutorial about how to manage strategic finances when I ain't around. It's a bit tedious, but I' hope I'll get it finished before I croak. BTW, in the unlikely event my wife were to predecease me, I could use a tutorial from her on the tactical aspect of finances. That is, she pays all the bills, knows how to wait until the last minute before paying a bill, knows what stores have discounts what days of the week, etc. I don't know squat about that. But she doesn't know squat about asset allocation, withdrawal rates, etc.

Sounds like we need to leave notes for each other.

 

[Finance Dave]

I've been trying to do the same thing - a tutorial about how to manage strategic finances when I ain't around. It's a bit tedious, but I' hope I'll get it finished before I croak. BTW, in the unlikely event my wife were to predecease me, I could use a tutorial from her on the tactical aspect of finances. That is, she pays all the bills, knows how to wait until the last minute before paying a bill, knows what stores have discounts what days of the week, etc. I don't know squat about that. But she doesn't know squat about asset allocation, withdrawal rates, etc.

Sounds like we need to leave notes for each other.

The bill paying thing is easy. Go to each utility and set up ACH debits (automatic clearing house). Tell them you want the transfer done the day before the due date. I write fewer than 15 checks a year...it's all on auto pilot.

As a matter of fact, when I first got my mortgage, they wanted me to set up ACH. Payment was due on the 1st, but there was a 'grace period' until the 11th. I said "take it out on the 10th". They said,"we can't do that", we have to take it on the due date. I said "fine, I'll send you a check each month". Then, every year they'd send me a letter telling me about their ACH program. I'd take this into the bank and ask again to have it taken out on the 10th...they'd say no. After 8 years of this, the manager got tired of seeing me...and now I'm paying via ACH on the 10th. 5 more years and we'll own our home.

 

[whitestick]

It's rather pathetic that in this day and age the wives' "plan" is simply to abdicate all responsibility for their financial futures to their respective husbands, and subsequently to their friends' husbands.

Two thoughts:

(1) What are they going to do if both of the husbands die many years before the wives?

(2) Do you and the other husband have a reciprocal "plan" for cooking and housekeeping (if one of the wives dies before her husband, the widower can expect the suviving wife to look after all his meals and laundry)?

If you die first, from your perspective it becomes a non-issue.

If the other husband dies first, I wouldn't feel under any obligation to become his widow's unpaid portfolio manager. It's not like you agreed to assume that responsibility (from your post, it's the wives' plan, not the husbands'). Just say no.

You can lead a horse to water, but you can't make it drink.

Ok, in fairness to this day and age for the wives, as I stated in my post, it's because we have a non-mainstream form of investing - think covered calls and income streams, rather then capital appreciation, that makes it a non-simple investing process. To continue to maintain that type of process and that higher level of income streams, is the part where they would suffer, if they turned the remaining assets over to a standard capital investment of equities and bonds mixtures. Not to get into a highjack of the merits of that, but following that process forgives them from your criticism.
The intent of the message was how to provide for them to continue to enjoy their relative income levels after the husbands are gone.
As to a reciprocal agreement, when you are discussing friends or family, it's a bit cold to cast them out into the street with no thought to our mutual humanness and dependence on each other on this planet. I really was trying to derive a plan for my own wife, but mentioned that others have very similar concerns as also expressed by others on this board. So even though I might die first , providing for my loved ones after I am gone is very much my issue.

 

[Ed_The_Gypsy]

This is a very important thread for me. I have to check on some things.

 

[chinaco]

We won't need to, although if it did put us in a bad spot it would be hard to decide what to do or how to handle it. Mostly, I'm trying to get her to see that she can't assume she'll only live a couple more years and can keep all her money in cash. She's only 73. I think she believes she controls the universe or something.

You raise a good point, though. If we don't make sure our spouses are taken care of (and vice-versa), we could be creating a situation that would not only make them unhappy, it could destroy inter-generational relationships as the kids have to make choices between their immediate family and mom or dad. Not what I would want to leave for my daughter.

We are the sandwich generation. It would appear to me that you are in a bit of a bind unless you are really well off... or unless your mother has some other assets.

Here are a some considerations. If your mother has a house, she may be able to sell it and spend that money. Not sure if you have siblings or not... But suppose she has some assets (e.g., home). You could be in a situation where you help her out... she dies, and the proceed from her assets go to your siblings. If you help your mom, do so only after here assets are gone. Remember, if she goes to a nursing home they will take it also.

If your mom has 20% of her previous income and needs say 50% of the previous income.... dispose of her assets to fill the gap first.

You can do this several ways. One would be to have her sell her house to you for a reasonable amount (conservative). Then let her pay you a modest rent... perhaps to cover expenses of the property and repairs. The same could be done with other non-liquid assets if she has any. That way she at least gets some money for income from her own assets. In the end, you may wind up spending money to help her, but it will alleviate some of it.

Also, she may be eligible for some sort of public assistance... check with some of the Govt and Private agencies in your area.


You are pointing out an example of the extreme situations that occur when people do not plan for the death of a spouse.

Thanks for sharing.

 

[Walt34]

If I go first income will drop 30%, but there will be one less person to feed and one less vehicle to maintain. She will sell the house we're in - way too big for one person - and write a check for a smaller place. There is enough in savings/investments/life insurance on me that she might even be better off, though I don't want her to think about that.

If she goes first (unlikely) I will definitely be better off as my income will go up. "The Plan" at retirement was that she was going to get another job but that didn't happen and she's going to school instead to finish her BA degree, which is okay with me.

The fly in the ointment is her father, who we just recently learned has been living slightly above his means for about the last ten years and is now broke. We're fixing up his paid-for house for sale and to get him into an environment that he can afford to sustain.

 

[chinaco]

...
The fly in the ointment is her father, who we just recently learned has been living slightly above his means for about the last ten years and is now broke. We're fixing up his paid-for house for sale and to get him into an environment that he can afford to sustain.

Just curious... Is he retired and how did he fall into that trap?

 

[Moemg]

Several community colleges have adult education courses geared to women learning about finances . Maybe some of you that are concerned could steer your wives or SO's to them. I would also purchase the most basic book I could about finances and give them it . Maybe some of the resistance you are seeing is because of the way you are coming across ( teaching the little woman finances attitude ) . Would you want her to stand you at the washing machine while she explains seperating clothes ,hand washing , and stain removal ?

 

[Walt34]

Just curious... Is he retired and how did he fall into that trap?

He's 83 and retired at 62 when the company he worked for moved to NJ from MD. He drove a school bus for another 9 years until he couldn't do that. His wife apparently was the money manager although he worked as a bookkeeper, and she passed away in 1999. So he just keeps going through his daily routine apparently because that's "what he's always done". I've sat down with him and shown him that the numbers cannot continue but he keeps doing the same things. I hope I never get that way. Between his pension and SS he has just under $1,900/month income.

He's agreeable (at least on the surface) to selling his house and moving to a retirement community that he can afford and offers the continuum of care that he may need, but also said a few weeks ago to SIL that "I'm going to die in this house." When crunch time comes we'll see.

So for now the "project" is to repaint the entire house - not done for 25 years - and put it up for sale. Even in today's market it should bring ~$300k and that's enough to get him into the retirement community with about $150k left over. The advantage of that is that they do have single-family homes and the $265/month fee on a two bedroom one bath house with garage covers ALL maintenance, interior and exterior, plus one meal a day in the cafeteria. He'd pay utilities and the property tax, about $115/month, so with no other bills he can sustain that.

 

[2B]

He's agreeable (at least on the surface) to selling his house and moving to a retirement community that he can afford and offers the continuum of care that he may need, but also said a few weeks ago to SIL that "I'm going to die in this house." When crunch time comes we'll see.

Good luck. My in-laws didn't understand why they should worry about power of attorny's or wills. Fortunately, DW badgered them until they got all the paperwork in place before MIL fell and broke her hip.

Even though the doctor said she'd never be able to go back home, they both talked about it like it would happen "as soon as she got better." Even after my FIL was diagnosed with Alzheimer's and moved into assisted living, they still talked about moving home "when they both got better."

He fought going in for several months and made DW feel like crap during the whole time. He blew a gasket when he found out the house was sold. MIL was also upset because they didn't have a place to move to when they got better.

Staying in their home is a major fixation for many of the elderly even when it totally defies logic or rational decision making. At a certain point you just have to do what needs to be done for them whether they like it or not.

If your father is mentally competent it's harder to take control. At a certain point you just have to let it go and realize that his mistakes are his problem. If he financially destroys himself, he will get a much worse "final years" than if he made more rational decisions. The house as a major asset is somewhat of a backstop. Eventually, he won't be able to afford it and then the sale becomes a necessity even if he still fights it. Just keep him away from the reverse mortgage thieves.

 

[Zoocat]

Several community colleges have adult education courses geared to women learning about finances . Maybe some of you that are concerned could steer your wives or SO's to them. I would also purchase the most basic book I could about finances and give them it . Maybe some of the resistance you are seeing is because of the way you are coming across ( teaching the little woman finances attitude ) . Would you want her to stand you at the washing machine while she explains seperating clothes ,hand washing , and stain removal ?

I had the same impression. Glad you spoke up, Moemg. As a former educator, I know that HOW you teach is as important as WHAT. And first you have to get the student's positive cooperation. One thing to keep in mind is that this issue could provoke a lot of fear (i.e. death). Fear can keep a person from learning.

It's best to encourage a person to undertake her own education. The community college course is great idea! Also, some communities have PF courses just for women, taught by women, usually through extended education or free university, etc.

 

[megacorp-firee]

We lucked out. My pension option (100% survivors benefit) will ensure that that is intact for DW if I go first. I basically, paid for and got an insurance policy by taking this option. We are not yet collecting SS. DW wants to start doing so at 66 and my plan is to do it at 70. SS is gravy on top of the pension and portfolio. DW calls it her 'shoe money' and she is looking forward to giving Emelda a run for her money. Between pension and portfolio dividends and interest, we are living 'large'.

Having a pension and overkilling the portfolio certainly helped.

 

[Zoocat]

I want to thank everyone who has participated in this thread. After reading through the whole thing and posting my response, I began to think about the investment choices my 86 yr old father is making for himself. He is a widower now. He has about 400K invested and my sister is the designated estate executor so she takes a look at his finances now and then. This money will have to be used for a nursing home, if necessary. I am uncomfortable with him being so invested in the stock market when he might need this money at any time.

So I just had a conversation about this issue with my sister and urged her to talk with Dad and get his investments into fixed income. I hope that she follows through, if not I will become very persistent on this issue.

 

[2B]

I want to thank everyone who has participated in this thread. After reading through the whole thing and posting my response, I began to think about the investment choices my 86 yr old father is making for himself. He is a widower now. He has about 400K invested and my sister is the designated estate executor so she takes a look at his finances now and then. This money will have to be used for a nursing home, if necessary. I am uncomfortable with him being so invested in the stock market when he might need this money at any time.

So I just had a conversation about this issue with my sister and urged her to talk with Dad and get his investments into fixed income. I hope that she follows through, if not I will become very persistent on this issue.

It would probably help to do a little financial planning since with $400K in assets (plus a house?) I suspect that much of this will eventually be inheritance to you and your sister (and others?).

Price a local nursing home. You can do this over the phone just for budgeting purposes. In the Houston area you can get a real good one (if any can be called good) for about $60K per year. Subtract out any SS and pensions because he won't have any expenses except his medications once he's in one. The same applies to assisted living but that's much cheaper -- about $40K per year in Houston.

You then have a rough estimate of what expenses he'll need from his assets. If he gets $24K in SS, that means for nursing care he'd need $36K from his assets if he lived in Houston. Depending on you estimated return, his assets are adequate for 12 to 20 years. The odds are highly against him lasting that length of time in a nursing facility.

What's my point? I don't think you want him to be too conservative because he still needs to protect himself financially if he does live almost forever. If he doesn't live 10+ more years, the assets will go to you and your sister who are still decades away from a similar situation as your father.

I'd suggest no more than 50 or 60% in fixed income. That by itself is enough to cover many years of care and probably more than he will need.

 

[haha]

Would you want her to stand you at the washing machine while she explains seperating clothes ,hand washing , and stain removal ?

I certainly have no problem asking women how to handle tasks that although I may have blundered through them I am far from really knowing how to do it. Actually, I think I can easily recognize where a person's interest and expertise lies, and feel no shame at asking for help.

As an example, the women of this board clearly know as much as the men about any of the topics we discuss except maybe cars, though they may be more polite in the ways that they help out.

I do agree with your thrust though- a lot of paternalism on this thread. I can see that it comes from love and a sense of responsibility toward one's wife or SO. But these topics and the corresponding attitudes can be tricky today.

I know a middle aged woman who has committed financial suicide over the past 10 years or so since her divorce. She has very poor job prospects and yet she has blown through >$1mm by a combination of overspending and being taken advantage of by promoters and FAs. I never could see a route to send her to helpful sources, as she is very defensive about her place in the world as a single female.

Men do the very same thing, probably more frequently. Pride goeth before a fall I guess.

Ha

 

[Khan]

I certainly have no problem asking women how to handle tasks that although I may have blundered through them I am far from really knowing how to do it. Actually, I think I can easily recognize where a person's interest and expertise lies, and feel no shame at asking for help.

As an example, the women of this board clearly know as much as the men about any of the topics we discuss except maybe cars, though they may be more polite in the ways that they help out.

I do agree with your thrust though- a lot of paternalism on this thread. I can see that it comes from love and a sense of responsibility toward one's wife or SO. But these topics and the corresponding attitudes can be tricky today.

I know a middle aged woman who has committed financial suicide over the past 10 years or so since her divorce. She has very poor job prospects and yet she has blown through >$1mm by a combination of overspending and being taken advantage of by promoters and FAs. I never could see a route to send her to helpful sources, as she is very defensive about her place in the world as a single female.

Men do the very same thing, probably more frequently. Pride goeth before a fall I guess.

Ha

One thing I have figured out over the years (related to having to stomp your ego flat) is that the first step to learning is admitting that someone else knows more than you do.

This can be especially difficult if the person to learn from is of a group that is somehow traditionally considered lower in prestige.